Are You Really an Investor?
By: Bill Wilton
May 05
Are you really a long-term investor?
I have seen plenty of people claim to be an investor for the long haul, yet fall victim to classic errors of long-term investing, my self included. Myopia is the biggest pitfall.
Being overly involved in short-term fluctuations is a surefire way to limit your long-term potential. I am not saying you can't find success in trading, but it requires a very different approach.
Get Some Ear Plugs
Technology has made advancements in all facets of society. But the recent decades have seen the rate of information flow grow by leaps and bounds. Real-time quotes, rapid-fire emails and press releases posted instantly across the web. Furthermore, now we can get everything, EVERYTHING, sent right to our phones. We can comb through data instantaneously, no matter where we are or what we are doing.
For traders, those technologies can be a godsend. But for investors they can be a nightmare. How are we supposed to filter out all of the noise that doesn't matter for long-term investors?
For example, the weekly initial claims report can be keyed on by some day traders, but why should blue-chip dividend collectors care? Rather, they should be only looking at the monthly non-farm report, even then it is not always necessary.
Zoom Out!
If you really are buying stocks with a long-term horizon, do just that. Take a step back from the rapid fire data and focus on the macro events.
Secondly, stop checking the index movements so often. The past couple weeks make that tough. Look at this chart, it looks down right scary to some people.
But compare that move to the market moves over just the past year.
Or better yet, 5 years! The recent weeks of volatility hardly even registers.
So, What Should We Do?
Long-term does not necessarily mean that you can't be aggressive, everyone's risk tolerance varies. But, if you would like some more stability, just stick to the basics.
Here are a few stocks that have cheap valuations, decent growth projections over a 5-year period and a Zacks #2 Rank (Buy) or better.
Chevron Corp (CVX - Analyst Report) is a Zacks #1 Rank (Strong Buy) that has a lot going for it. Shares of CVX are trading at just 8 times this year's estimates and earnings are expected to grow at 12% over the next 3-5 years. Alternative energy is great and will happen at some point in the future, but you better believe it’s going to be a while. And, companies like CVX will see the writing on the wall well ahead of that time and I am very willing to bet they, and other similar companies, will be just as big in that space. Probably through M&A. After all, they see themselves as energy companies, not just oil companies.
Timken Co (TKR - Snapshot Report) makes anti-friction bearings and similar products in the U.S. and Europe. Their end markets are fairly diversified and with a market cap of over 5 billion, there shouldn't be any "going concern" worries.
Shares have a Zacks #1 Rank and fantastic growth expectations. Earnings should grow upwards of 14% annually and the forward P/E is only 13 times. That puts the PEG ratio at 0.9, a bargain.
Textainer Group (TGH - Snapshot Report) is the largest intermodal container lessor in the world. The company also sells used containers to over 1,000 customers.
Estimates have been creeping higher, putting shares at a Zacks #1 Rank and the forward P/E at just 11 times this year's estimates. Throw in a 12% annualized long-term growth rate and you have another PEG ratio of 0.9.
Just about everything that is worn, eaten, used, etc has been on a combination of trucks, trains and ships. That is one thing that will not change any time soon. So what better choice than a company that is in that business?
Tip of the Iceberg
These are just 3 examples of the hundreds or thousands of stocks out there that would make suitable investments. Remember, if you truly are a long-term investor ignore the short-term noise and keep your eyes on the prize.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service
All information on this website is for educational purposes only and is not intended to provide financial advise. Any statements about profits or income, expressed or implied, does not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed. You accept full responsibilities for your actions, trades, profit or loss, and agree to hold MinKL Invest harmless in any and all ways.
I have seen plenty of people claim to be an investor for the long haul, yet fall victim to classic errors of long-term investing, my self included. Myopia is the biggest pitfall.
Being overly involved in short-term fluctuations is a surefire way to limit your long-term potential. I am not saying you can't find success in trading, but it requires a very different approach.
Get Some Ear Plugs
Technology has made advancements in all facets of society. But the recent decades have seen the rate of information flow grow by leaps and bounds. Real-time quotes, rapid-fire emails and press releases posted instantly across the web. Furthermore, now we can get everything, EVERYTHING, sent right to our phones. We can comb through data instantaneously, no matter where we are or what we are doing.
For traders, those technologies can be a godsend. But for investors they can be a nightmare. How are we supposed to filter out all of the noise that doesn't matter for long-term investors?
For example, the weekly initial claims report can be keyed on by some day traders, but why should blue-chip dividend collectors care? Rather, they should be only looking at the monthly non-farm report, even then it is not always necessary.
Zoom Out!
If you really are buying stocks with a long-term horizon, do just that. Take a step back from the rapid fire data and focus on the macro events.
Secondly, stop checking the index movements so often. The past couple weeks make that tough. Look at this chart, it looks down right scary to some people.
But compare that move to the market moves over just the past year.
Or better yet, 5 years! The recent weeks of volatility hardly even registers.
So, What Should We Do?
Long-term does not necessarily mean that you can't be aggressive, everyone's risk tolerance varies. But, if you would like some more stability, just stick to the basics.
Here are a few stocks that have cheap valuations, decent growth projections over a 5-year period and a Zacks #2 Rank (Buy) or better.
Chevron Corp (CVX - Analyst Report) is a Zacks #1 Rank (Strong Buy) that has a lot going for it. Shares of CVX are trading at just 8 times this year's estimates and earnings are expected to grow at 12% over the next 3-5 years. Alternative energy is great and will happen at some point in the future, but you better believe it’s going to be a while. And, companies like CVX will see the writing on the wall well ahead of that time and I am very willing to bet they, and other similar companies, will be just as big in that space. Probably through M&A. After all, they see themselves as energy companies, not just oil companies.
Timken Co (TKR - Snapshot Report) makes anti-friction bearings and similar products in the U.S. and Europe. Their end markets are fairly diversified and with a market cap of over 5 billion, there shouldn't be any "going concern" worries.
Shares have a Zacks #1 Rank and fantastic growth expectations. Earnings should grow upwards of 14% annually and the forward P/E is only 13 times. That puts the PEG ratio at 0.9, a bargain.
Textainer Group (TGH - Snapshot Report) is the largest intermodal container lessor in the world. The company also sells used containers to over 1,000 customers.
Estimates have been creeping higher, putting shares at a Zacks #1 Rank and the forward P/E at just 11 times this year's estimates. Throw in a 12% annualized long-term growth rate and you have another PEG ratio of 0.9.
Just about everything that is worn, eaten, used, etc has been on a combination of trucks, trains and ships. That is one thing that will not change any time soon. So what better choice than a company that is in that business?
Tip of the Iceberg
These are just 3 examples of the hundreds or thousands of stocks out there that would make suitable investments. Remember, if you truly are a long-term investor ignore the short-term noise and keep your eyes on the prize.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service
All information on this website is for educational purposes only and is not intended to provide financial advise. Any statements about profits or income, expressed or implied, does not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed. You accept full responsibilities for your actions, trades, profit or loss, and agree to hold MinKL Invest harmless in any and all ways.
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